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YOUTHSTREAM ACQUISITION CORP.
$40,000,000
8.0% SUBORDINATED SECURED NOTES
----------
NOTE PURCHASE AGREEMENT
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DATED AS OF FEBRUARY 25, 2005
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TABLE OF CONTENTS
Page
----
SECTION 1. Authorization Of
Notes....................................... 1
SECTION 2. Sale And Purchase of
Notes................................... 2
SECTION 3.
Closing...................................................... 2
SECTION 4. Conditions To
Closing........................................ 2
Section 4.1 Representations and
Warranties......................... 2
Section 4.2 Performance; No
Default................................ 3
Section 4.3 Compliance
Certificates................................ 3
Section 4.4 Purchase Permitted by Applicable Law,
Etc.............. 3
Section 4.5 Related
Transactions................................... 3
Section 4.6 Proceedings and
Documents.............................. 3
Section 4.7 Securities Purchase
Agreement.......................... 3
SECTION 5. Representations and warranties of the
company................ 3
Section 5.1 Organization; Power and
Authority...................... 3
Section 5.2 Authorization,
Etc..................................... 4
Section 5.3
Disclosure............................................. 4
Section 5.4
Subsidiaries........................................... 4
Section 5.5 Compliance with Laws, Other Instruments,
Etc........... 4
Section 5.6 Governmental Authorizations,
Etc....................... 4
Section 5.7 Litigation; Observance of Agreements; Statutes
and
Orders.............................................. 5
Section 5.8
Taxes.................................................. 5
Section 5.9 Title to
Property...................................... 5
Section 5.10 Licenses, Permits,
Etc................................. 5
Section 5.11 Existing Debt; Future
Liens............................ 5
SECTION 6. REPRESENTATIONS OF THE
PURCHASER............................. 5
Section 6.1 Purchase for
Investment................................ 5
Section 6.2 Organization; Power and
Authority...................... 6
Section 6.3 Authorization,
Etc..................................... 6
SECTION 7. Informational Covenants and
Reports.......................... 6
Section 7.1 Financial and Business
Information..................... 6
Section 7.2
Inspection............................................. 8
SECTION 8. Prepayment of the
notes...................................... 8
Section 8.1 Required
Prepayments................................... 8
Section 8.2 Optional
Prepayments................................... 8
Section 8.3 Allocation of Partial
Prepayments...................... 8
Section 8.4 Maturity; Surrender,
Etc............................... 9
Section 8.5 Change in
Control...................................... 9
SECTION 9. Additional Affirmative
covenants............................. 10
Section 9.1 Compliance with
Law.................................... 10
Section 9.2
Insurance.............................................. 11
i
Section 9.3 Maintenance of
Properties.............................. 11
Section 9.4 Payment of
Taxes....................................... 11
Section 9.5 Corporate Existence,
Etc............................... 11
Section 9.6 Covenants Regarding Earnings Before Interest,
Taxes,
Depreciation and
Amortization....................... 11
Section 9.7
Cash................................................... 11
Section 9.8 Additional Affirmative
Covenants....................... 12
SECTION 10. Negative
covenants........................................... 12
Section 10.1 Priority
Debt.......................................... 13
Section 10.2
Liens.................................................. 13
Section 10.3 Merger, Consolidation,
etc............................. 14
Section 10.4 Sale of Assets,
etc.................................... 14
Section 10.5 Line of
Business....................................... 14
Section 10.6 Transactions with
Affiliates........................... 14
Section 10.7 Certain Other
Covenants................................ 15
SECTION 11. Events Of
Default............................................ 16
SECTION 12. Remedies On Default,
Etc..................................... 18
Section 12.1
Acceleration........................................... 18
Section 12.2 Other
Remedies......................................... 18
Section 12.3
Rescission............................................. 18
Section 12.4 No Waivers or Election of Remedies, Expenses,
Etc...... 19
SECTION 13. Registration; Exchange; Substitution Of
Notes................ 19
Section 13.1 Registration of
Notes.................................. 19
Section 13.2 Transfer and Exchange of
Notes......................... 19
Section 13.3 Replacement of
Notes................................... 19
SECTION 14. Payments on notes and Certain Tax
Matters.................... 20
Section 14.1
Payments............................................... 20
Section 14.2 Withholding
Taxes...................................... 20
SECTION 15. Expenses,
Etc................................................ 21
Section 15.1
Expenses............................................... 21
Section 15.2
Survival............................................... 21
SECTION 16. Survival of representations and warranties; entire
agreement................................................. 21
SECTION 17. Amendment and
waiver......................................... 22
Section 17.1
Requirements........................................... 22
Section 17.2 Solicitation of Holders of
Notes....................... 22
Section 17.3 Binding Effect,
Etc.................................... 22
SECTION 18.
Notices...................................................... 22
SECTION 19. Reproduction Of
Documents.................................... 23
SECTION 20. Confidential
Information..................................... 23
SECTION 21. Substitution of
purchaser.................................... 23
SECTION 20.
Miscellaneous................................................ 24
ii
Section 22.1 Successors and
Assigns................................. 24
Section 22.2 Payments Due on Non-Business
Days...................... 24
Section 22.3
Severability........................................... 24
Section 22.4 Certain
Rights......................................... 24
Section 22.5
Construction........................................... 24
Section 22.6
Counterparts........................................... 25
Section 22.7 Governing
Law.......................................... 25
iii
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE C -- FORM OF INFORMATION REPORT
SCHEDULE 10.2 -- SCHEDULE OF LIENS
EXHIBIT 1-A -- FORM OF 8.0% SUBORDINATED SECURED NOTE (KES
HOLDINGS, LLC)
EXHIBIT 1-B -- FORM OF 8.0% SUBORDINATED SECURED NOTE (ATACAMA
CAPITAL
HOLDINGS, LTD.)
EXHIBIT 2-1 -- YOUTHSTREAM MEDIA NETWORKS, INC. PLEDGE AGREEMENT
(KES
HOLDINGS, LLC)
EXHIBIT 2-2 -- YOUTHSTREAM MEDIA NETWORKS, INC. PLEDGE AGREEMENT
(ATACAMA
CAPITAL HOLDINGS, LTD.)
EXHIBIT 2-A -- FORM OF SECURITY AGREEMENT
EXHIBITS 2-B
AND 2-C -- FORMS OF PLEDGE AGREEMENT
EXHIBIT 2-D -- FORM OF FEE MORTGAGE, ASSIGNMENT OF RENTS AND
LEASES, SECURITY
AGREEMENT AND FIXTURE FILING
EXHIBIT 2-E -- FORM OF ASSIGNMENT OF RENTS AND LEASES
iv
YOUTHSTREAM ACQUISITION CORP.
8.0% SUBORDINATED SECURED NOTES
Dated as of
February 25, 2005
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
YOUTHSTREAM ACQUISITION CORP., a Delaware corporation, agrees
with the
Purchasers listed in the attached Schedule A as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of Forty Million
Dollars
($40,000,000) aggregate principal amount of its eight percent
(8.0%)
Subordinated Secured Notes due February 28, 2015 (the "NOTES," such
term to
include any such notes issued in substitution therefor pursuant to
Section 13 of
this Agreement (as hereinafter defined)). The Notes shall be
substantially in
the form set out in Exhibits 1-A and 1-B, with such changes
therefrom, if any,
as may be approved by each Purchaser and the Company. The
obligations of the
Company under this Agreement shall be guaranteed by YouthStream
Media Networks,
Inc., on a limited recourse basis pursuant to a guarantee to be
contained in the
YSTM Pledge Agreements defined below (the "GUARANTY"). The Guaranty
shall be
secured by a pledge of all of the capital stock or other equity
interests of the
Company owned by YouthStream Media Networks, Inc. pursuant to a
YouthStream
Media Networks Pledge Agreement in the forms of Exhibit 2-1 and
Exhibit 2-2 (the
"YSTM PLEDGE AGREEMENTS"). In addition, the Notes shall be secured,
upon the
earlier of (x) the consent of General Electric Capital Corporation
(together
with its successors or assigns, "GECC") or (y) the repayment in
full of the
Company's obligations to GECC (as contemplated by Section 9.9), by
the
following: (i) a Lien on all of the property of the Company
pursuant to a
Security Agreement in the form set out in Exhibit 2-A (the
"SECURITY
AGREEMENT"), (ii) pledges of the Membership Interest and AKHC Stock
pursuant to
the Pledge Agreements in the forms set out in Exhibits 2-B and 2-C
(the "PLEDGE
AGREEMENTS"), (iii) a Fee Mortgage, Assignment of Rents and Leases,
Security
Agreement and Fixture Filing in the form set out in Exhibit 2-D
(the "MORTGAGE")
and (iv) an Assignment of Rents and Leases in the form set out in
Exhibit 2-E
(the "ASSIGNMENT") (collectively, this Agreement, the Notes and the
YSTM Pledge
Agreements are referred to as the "PRIMARY LOAN DOCUMENTS"; the
Security
Agreement, the Mortgage and the Assignment are referred to as the
"SECONDARY
LOAN DOCUMENTS"; and the Primary Loan Documents and the Secondary
Loan Documents
are referred to as the "LOAN DOCUMENTS"). The assets and properties
subject to
the YSTM Pledge Agreements are referred to as the "PRIMARY
COLLATERAL"; the
assets and properties subject to the Security Agreement, the
Mortgage and the
Assignment are referred to as the "SECONDARY COLLATERAL"; and
Primary Collateral
and the Secondary Collateral are referred to together as the
"COLLATERAL." The
Lien and pledges with respect to the Primary Collateral shall be
senior to all
other creditors of YouthStream Media Networks, Inc. with respect to
the Primary
Collateral. The Lien and pledges with respect to the
Secondary Collateral shall be subordinated to any Lien securing any
Priority
Debt. Certain capitalized terms used in this Agreement are defined
in Schedule
B; references to a "SCHEDULE" or an "EXHIBIT" are, unless otherwise
specified,
to a Schedule or an Exhibit attached to this Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the
Company will
issue and sell to each Purchaser and each Purchaser will purchase
from the
Company, at the Closing provided for in Section 3, Notes in the
principal amount
specified opposite such Purchaser's name in Schedule A. The Notes
to be issued
and sold hereunder constitute a portion of the purchase price to be
paid for the
membership interest ("MEMBERSHIP INTEREST") of KES Acquisition
Company LLC ("KES
ACQUISITION") owned by KES Holdings, LLC, a Delaware limited
liability company
("KESH"), and the shares of stock of Atacama KES Holding
Corporation, a Delaware
corporation (the "AKHC STOCK"), owned by Atacama Capital Holdings,
Ltd., a
British Virgin Islands company ("ACH"), which are being purchased
by the Company
pursuant to that certain Securities Purchase Agreement by and among
the Company
and the Purchasers dated as of even date herewith (the "SECURITIES
PURCHASE
AGREEMENT"). The obligations of each Purchaser hereunder are
several and not
joint obligations and each Purchaser shall have no obligation and
no liability
to any Person for the performance or nonperformance by any other
Purchaser
hereunder.
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by each
Purchaser shall
occur at the same time and place as the transactions contemplated
in the
Securities Purchase Agreement are consummated (the "CLOSING"). At
the Closing,
the Company will deliver to each Purchaser the Notes to be
purchased by such
Purchaser in the form of a single Note (or such greater number of
Notes in
denominations of at least One Hundred Thousand Dollars ($100,000)
as such
Purchaser may request), and such Purchaser's respective executed
YSTM Pledge
Agreement, all dated the date of the Closing and registered in such
Purchaser's
name (or in the name of such Purchaser's nominee). If, at the
Closing, the
Company shall fail to tender such Notes to any Purchaser as
provided above in
this Section 3, or any of the conditions specified in Section 4
shall not have
been fulfilled to any Purchaser's satisfaction, such Purchaser
shall, at such
Purchaser's election, be relieved of all further obligations under
this
Agreement, without thereby waiving any rights such Purchaser may
have by reason
of such failure or such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
The obligation of each Purchaser to purchase and pay for the
Notes to be
sold to such Purchaser at the Closing is subject to the fulfillment
to such
Purchaser's satisfaction, prior to or at the Closing, of the
following
conditions:
Section 4.1 Representations and Warranties. The
representations and
warranties of the Company in this Agreement shall be correct when
made and at
the time of the Closing.
2
Section 4.2 Performance; No Default. The Company shall have
performed and
complied with all agreements and conditions contained in the
Primary Loan
Documents required to be performed or complied with by it prior to
or at the
Closing, and after giving effect to the issue and sale of the
Notes, no Default
or Event of Default shall have occurred and be continuing.
Section 4.3 Compliance Certificates.
(a) Officer's Certificate. The Company shall have
delivered to such
Purchaser an Officer's Certificate, dated the date of the
Closing,
certifying that the conditions specified in Sections 4.1; 4.2
and 4.7 have
been fulfilled.
(b) Secretary's Certificate. The Company shall have
delivered to such
Purchaser a certificate certifying as to the resolutions
attached thereto
and other corporate proceedings relating to the authorization,
execution
and delivery of the Notes and this Agreement.
Section 4.4 Purchase Permitted by Applicable Law, Etc. On the
date of the
Closing each purchase of Notes shall be permitted by the laws and
regulations of
each jurisdiction to which each Purchaser is subject. If requested
by any
Purchaser, such Purchaser shall have received an Officer's
Certificate
certifying as to such matters of fact as such Purchaser may
reasonably specify
to enable such Purchaser to determine whether such purchase is so
permitted.
Section 4.5 Related Transactions. The Company shall have
consummated the
sale of the entire principal amount of the Notes scheduled to be
sold on the
date of Closing pursuant to this Agreement.
Section 4.6 Proceedings and Documents. All corporate and other
proceedings
in connection with the transactions contemplated by the Primary
Loan Documents
and all documents and instruments incident to such transactions
shall be
satisfactory to such Purchaser and such Purchaser's special
counsel, and such
Purchaser and such Purchaser's special counsel shall have received
all such
counterpart originals or certified or other copies of such
documents as such
Purchaser or such Purchaser's special counsel may reasonably
request.
Section 4.7 Securities Purchase Agreement. The transactions
contemplated in
the Securities Purchase Agreement shall be fully consummated.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
Section 5.1 Organization; Power and Authority. The Company is
a corporation
duly organized, validly existing and in good standing under the
laws of its
jurisdiction of incorporation, and is duly qualified as a foreign
corporation
and is in good standing in each jurisdiction in which such
qualification is
required by law, other than those jurisdictions as to which the
failure to be so
qualified or in good standing could not, individually or in the
aggregate,
reasonably be expected to have a Material Adverse Effect. The
Company has the
corporate power and authority to own or hold under lease the
properties it
currently purports to
3
own or hold under lease, to transact the business it transacts and
currently
proposes to transact, to execute and deliver this Agreement, the
other Primary
Loan Documents, and if delivered in accordance with the terms of
this Agreement,
the Secondary Loan Documents, and to perform the provisions hereof
and thereof.
Section 5.2 Authorization, Etc. This Agreement, the other
Primary Loan
Documents, and if delivered in accordance with the terms of this
Agreement, the
Secondary Loan Documents, have been duly authorized by all
necessary corporate
action on the part of the Company, and this Agreement constitutes,
and upon
execution and delivery thereof each other Loan Document will
constitute, a
legal, valid and binding obligation of the Company enforceable
against the
Company in accordance with its terms, except as such enforceability
may be
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and
(ii) general principles of equity (regardless of whether such
enforceability is
considered in a proceeding in equity or at law).
Section 5.3 Disclosure. None of the Loan Documents, the
documents,
certificates or other writings delivered to each Purchaser by or on
behalf of
the Company in connection with the transactions contemplated
thereby, taken as a
whole, contain any untrue statement of a material fact or omit to
state any
material fact necessary to make the statements therein not
misleading in light
of the circumstances under which they were made. There is no fact
known to the
Company that could reasonably be expected to have a Material
Adverse Effect that
has not been set forth herein or in the other documents,
certificates and other
writings delivered to each Purchaser by or on behalf of the Company
specifically
for use in connection with the transactions contemplated hereby.
Section 5.4 Subsidiaries. Prior to the consummation of the
transactions
contemplated in the Securities Purchase Agreement, the Company had
no
Subsidiaries.
Section 5.5 Compliance with Laws, Other Instruments, Etc. The
execution,
delivery and performance by the Company of the Loan Documents will
not (a)
contravene, result in any breach of, or constitute a default under,
or result in
the creation of any Lien in respect of any property of the Company
under, any
indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease,
corporate charter or by-laws, or any other agreement or instrument
to which the
Company is bound or by which the Company or any of its properties
may be bound
or affected, (b) conflict with or result in a breach of any of the
terms,
conditions or provisions of any order, judgment, decree, or ruling
of any court,
arbitrator or Governmental Authority applicable to the Company or
(c) violate
any provision of any statute or other rule or regulation of any
Governmental
Authority applicable to the Company, except for such
contraventions, breaches,
defaults, liens, conflicts or violations as would not, individually
or in the
aggregate, be reasonably likely to constitute a Material Adverse
Affect.
Section 5.6 Governmental Authorizations, Etc. No consent,
approval or
authorization of, or registration, filing or declaration with, any
Governmental
Authority is required in connection with the execution, delivery or
performance
by the Company of the Loan Documents other than the filing of Form
D with the
Securities and Exchange Commission and comparable state securities
law filings
which may be required.
4
Section 5.7 Litigation; Observance of Agreements; Statutes and
Orders.
(a) There are no actions, suits or proceedings pending
or, to the
knowledge of the Company, threatened against or affecting the
Company or
any property of the Company in any court or before any
arbitrator of any
kind or before or by any Governmental Authority that,
individually or in
the aggregate, could reasonably be expected to have a Material
Adverse
Effect.
(b) The Company is not in default under any term of any
agreement or
instrument to which it is a party or by which it is bound, or
any order,
judgment, decree or ruling of any court, arbitrator or
Governmental
Authority or is in violation of any applicable law, ordinance,
rule or
regulation (including without limitation Environmental Laws)
of any
Governmental Authority, which default or violation,
individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
Section 5.8 Taxes. The Company is newly formed and has not
filed tax
returns. The Company knows of no basis for any tax or assessment
that could
reasonably be expected to have a Material Adverse Effect.
Section 5.9 Title to Property. Upon the closing of the
transactions
contemplated by the Securities Purchase Agreement, the Company will
have good
and sufficient title to its properties that individually or in the
aggregate are
Material, free and clear of Liens prohibited by this Agreement.
Section 5.10 Licenses, Permits, Etc. Upon the closing of the
transactions
contemplated by the Securities Purchase Agreement, the Company will
own or
possess all licenses, permits, franchises, authorizations, patents,
copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually
or in the aggregate are Material, without known conflict with the
rights of
others.
Section 5.11 Existing Debt; Future Liens.
(a) Prior to the consummation of the transactions
contemplated in the
Securities Purchase Agreement, the Company had no Debt.
(b) The Company has not agreed or consented to cause or
permit in the
future (upon the happening of a contingency or otherwise) any
of its
property, whether now owned or hereafter acquired, to be
subject to a Lien
not permitted by Section 10.2.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
Section 6.1 Purchase for Investment. Each Purchaser represents
that it is
purchasing the Notes for its own account or for one or more
separate accounts
maintained by it and not with a view to the distribution thereof,
provided that
the disposition of such Purchaser's property shall at all times be
within such
Purchaser's control. Each Purchaser understands that the Notes have
not been
registered under the Securities Act and may be resold only if
registered
pursuant to the provisions of the Securities Act or if an exemption
from
registration is available, except under
5
circumstances where neither such registration nor such an exemption
is required
by law, and that the Company is not required to register the Notes.
Section 6.2 Organization; Power and Authority. Each Purchaser
represents
that it is an entity duly organized, validly existing and in good
standing under
the laws of its jurisdiction of incorporation or formation, is duly
qualified as
a foreign corporation or limited liability company and is in good
standing in
each jurisdiction in which such qualification is required by law,
other than
those jurisdictions as to which the failure to be so qualified or
in good
standing could not, individually or in the aggregate, reasonably be
expected to
have a Material Adverse Effect. Each Purchaser has the corporate
power and
authority to own or hold under lease all property that it purports
to own or
hold under lease, to transact the business it transacts and
proposes to
transact, to execute and deliver this Agreement and the Assignment
and to
perform the provisions hereof and thereof.
Section 6.3 Authorization, Etc. Each of the Loan Documents to
which such
Purchaser is (or becomes) a party has been duly authorized by all
necessary
corporate action on the part of such Purchaser, and constitutes,
upon execution
and delivery thereof, a legal, valid and binding obligation of each
such
Purchaser enforceable against such Purchaser in accordance with its
terms,
except as such enforceability may be limited by (i) applicable
bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the
enforcement of creditor's rights generally and (ii) general
principles of equity
(regardless of whether such enforceability is considered in a
proceeding in
equity or at law).
SECTION 7. INFORMATIONAL COVENANTS AND REPORTS.
Section 7.1 Financial and Business Information. The Company's
quarterly and
annual financial statements will be included in the consolidated
financial
statements of YouthStream Media Networks, Inc., which will be filed
as required
with the Securities and Exchange Commission. The Company shall
deliver to each
Holder of Notes:
(a) Notice of Default or Event of Default -- promptly,
and in any
event within five (5) Business Days after a Responsible
Officer becoming
aware of the existence of any Default or Event of Default, a
written notice
specifying the nature and period of existence thereof and what
action the
Company is taking or proposes to take with respect thereto;
(b) Notices from Governmental Authority -- promptly, and
in any event
within thirty (30) days of receipt thereof, copies of any
notice to the
Company from any Federal or state Governmental Authority
relating to any
order, ruling, statute or other law or regulation that could
reasonably be
expected to have a Material Adverse Effect; and
(c) Financial Reports -
(i) Within fifteen (15) calendar days following the
end of each
fiscal month, an aged trial balance by account debtor and
an inventory
perpetual or physical (as requested by the Holders) in a
form
reasonably approved by the Holders and as soon as
available but in no
event later than thirty (30) calendar
6
days following the end of each fiscal month, a
reconciliation of the
aged trial balance and the inventory perpetual or
physical (as
requested by the Holders) to the Company's general ledger
and from the
general ledger to the financial statements for such
fiscal month
accompanied by supporting detail and documentation as the
Holders may
request;
(ii) Within fifteen (15) calendar days following the
end of each
fiscal month, an accounts payable analysis in a form
reasonably
approved by the Holders (together with an accounts
payable aging) and
an accounts receivable roll forward analysis in a form
reasonably
approved by the Holders, each certified as true and
correct by the
Chief Financial Officer of the Company or such other
officer as is
acceptable to the Holders;
(iii) Within thirty (30) calendar days following the
end of each
fiscal month, the financial statements for such fiscal
month, which
shall provide comparisons to budget and actual results
for the
corresponding period during the prior fiscal year, both
on a monthly
and year-to-date basis, and accompanied by a
certification from the
Chief Executive Officer or Chief Financial Officer of the
Company (or
such other officer as is acceptable to the Holders) that
such
financial statements are complete and correct, that there
was no Event
of Default (or specifying the Event(s) of Defaults that
have occurred
during such period), and showing in reasonable detail the
calculations
used in determining compliance with the financial
covenants hereunder;
(iv) Within ninety (90) calendar days following the
end of each
fiscal year, the financial statements for such fiscal
year certified
without qualification by an independent certified
accounting firm
acceptable to the Holders, which shall provide
comparisons to the
prior fiscal year, and shall be accompanied by (i) a
statement in
reasonable detail showing the calculations used in
determining
compliance with the financial covenants hereunder, (ii) a
report from
the Company's accountants to the effect that in
connection with their
audit examination nothing has come to their attention to
cause them to
believe that an Event of Default has occurred or is
continuing (or
specifying such Events of Default) and (iii) any
management letter
that may be issued;
(v) Within five (5) calendar days prior to the end
of each fiscal
quarter, commencing with the fiscal quarter ending March
31, 2005, an
operating budget (the "OPERATING BUDGET") for the next
fiscal quarter,
which will be prepared by the Company in good faith, with
care and
diligence, and using assumptions that are reasonable
under the
circumstances at the time such budget is delivered to the
Holders and
disclosed therein when delivered, and which shall be
acceptable to
Required Holders; provided, however, that the approval of
the Required
Holders shall not be withheld unreasonably and; provided,
further,
that in the event that the Company is in material
compliance with all
terms of this Agreement as of the end of the fiscal
quarter
immediately preceding the fiscal quarter for which each
such Operating
Budget is delivered and is expected, based upon such
Operating Budget,
to be in compliance with all applicable financial
7
covenants under this Agreement with respect to such
fiscal quarter,
any refusal by the Required Holders to approve such
Operating Budget
shall not be deemed to be reasonable.
(vi) On the first (1st) and fifteenth (15th) day of
each month, a
report in substantially the form set forth in Schedule C,
attached
hereto, containing the information with respect to the
Company for the
two-week period then ended.
(d) Requested Information -- with reasonable promptness,
such other
data and information relating to the business, operations,
affairs,
financial condition, assets or properties of the Company,
including,
without limitation, income statements, balance sheets,
statements of cash
flows, tax returns and other similar financial information
regarding the
Company, tax returns (together with supporting documentation)
as the
Holders may request from time to time, or relating to the
ability of the
Company to perform its obligations hereunder and under the
Notes as from
time to time may be reasonably requested by any such Holder of
Notes. In
addition, the Company shall promptly advise the Holders in
reasonable
detail of (i) any Lien, other than a Permitted Lien, attaching
to or
asserted against any of the Collateral or any occurrence
causing a material
loss or decline in value of any Collateral and the estimated
(or actual, if
available) amount of any such loss or decline, (ii) any
material change in
the composition of the Collateral and (iii) the occurrence of
any Event of
Default or any other event that has had or could reasonably be
expected to
have a Material Adverse Effect.
Section 7.2 Inspection. The Company shall permit the
representatives of
each Holder of Notes at the expense of such Holder and upon
reasonable prior
notice to the Company, to visit the principal executive office of
the Company,
to discuss the affairs, finances and accounts of the Company with
the Company's
officers, and (with the consent of the Company, which consent will
not be
unreasonably withheld) to visit the other offices and properties of
the Company,
and generally to inspect the Collateral, all at such reasonable
times and as
often as may be reasonably requested in writing.
SECTION 8. PREPAYMENT OF THE NOTES.
Section 8.1 Required Prepayments. Certain prepayments of
principal are
required under the Notes. The entire outstanding principal amount
of the Notes
shall become due and payable on February 28, 2015.
Section 8.2 Optional Prepayments. Except as set forth in the
Notes and in
Section 8.5 of this Agreement, the Company may not prepay the
Notes.
Section 8.3 Allocation of Partial Prepayments. Except if any
Holder of a
Note declines to accept an offer of prepayment pursuant to Section
8.5, in the
case of each partial prepayment of the Notes, the principal amount
of the Notes
to be prepaid shall be allocated among all of the Notes at the time
outstanding
in proportion, as nearly as practicable, to the respective unpaid
principal
amounts thereof not theretofore called for prepayment.
8
Section 8.4 Maturity; Surrender, Etc. In the case of each
prepayment of
Notes pursuant to this Section 8, the principal amount of each Note
to be
prepaid shall mature and become due and payable on the date fixed
for such
prepayment, together with interest on such principal amount accrued
to such
date. From and after such date, unless the Company shall fail to
pay such
principal amount when so due and payable, together with the
interest as
aforesaid, interest on such principal amount shall cease to accrue.
Any Note
paid or prepaid in full shall be surrendered to the Company and
cancelled and
shall not be reissued, and no Note shall be issued in lieu of any
prepaid
principal amount of any Note.
Section 8.5 Change in Control.
(a) Notice of Change in Control or Control Event. The
Company will,
within five (5) Business Days after any Responsible Officer
has knowledge
of the occurrence of any Change in Control or Control Event,
give written
notice of such Change in Control or Control Event to each
Holder of Notes
unless notice in respect of such Change in Control (or the
Change in
Control contemplated by such Control Event) shall have been
given pursuant
to subparagraph (b) of this Section 8.5. If a Change in
Control has
occurred, such notice shall contain and constitute an offer to
prepay Notes
as described in subparagraph (c) of this Section 8.5 and shall
be
accompanied by the certificate described in subparagraph (g)
of this
Section 8.5.
(b) Condition to Company Action. The Company will not
take any action
that consummates or finalizes a Change in Control unless (i)
at least
fifteen (15) days prior to such action it shall have given to
each Holder
of Notes written notice containing and constituting an offer
to prepay
Notes as described in subparagraph (c) of this Section 8.5,
accompanied by
the certificate described in subparagraph (g) of this Section
8.5, and (ii)
contemporaneously with such action, it prepays all Notes
required to be
prepaid in accordance with this Section 8.5.
(c) Offer to Prepay Notes. The offer to prepay Notes
contemplated by
subparagraphs (a) and (b) of this Section 8.5 shall be an
offer to prepay,
in accordance with and subject to this Section 8.5, all, but
not less than
all, the Notes held by each Holder (in this case only,
"Holder" in respect
of any Note registered in the name of a nominee for a
disclosed beneficial
owner shall mean such beneficial owner) on a date specified in
such offer
(the "PROPOSED PREPAYMENT DATE"). If such Proposed Prepayment
Date is in
connection with an offer contemplated by subparagraph (a) of
this Section
8.5, such date shall be not less than ten (10) Business Days
and not more
than twenty (20) Business Days after the date of such offer
(if the
Proposed Prepayment Date shall not be specified in such offer,
the Proposed
Prepayment Date shall be the fifteenth (15th) Business Day
after the date
of such offer).
(d) Acceptance. A Holder of Notes may accept the offer to
prepay made
pursuant to this Section 8.5 by causing a notice of such
acceptance to be
delivered to the Company at least three (3) Business Days
prior to the
Proposed Prepayment Date. A failure by a Holder of Notes to
respond to an
offer to prepay made pursuant to this Section 8.5 shall be
deemed to
constitute an acceptance of such offer by such Holder.
9
(e) Prepayment. Prepayment of the Notes to be prepaid
pursuant to this
Section 8.5 shall be at one hundred percent (100%) of the
principal amount
of such Notes, together with interest on such Notes accrued to
the date of
prepayment. The prepayment shall be made on the Proposed
Prepayment Date
except as provided in subparagraph (f) of this Section 8.5.
(f) Deferral Pending Change in Control. The obligation of
the Company
to prepay Notes pursuant to the offers required by
subparagraph (b) and
accepted in accordance with subparagraph (d) of this Section
8.5 is subject
to the occurrence of the Change in Control in respect of which
such offers
and acceptances shall have been made. In the event that such
Change in
Control does not occur on the Proposed Prepayment Date in
respect thereof,
the prepayment shall be deferred until and shall be made on
the date on
which such Change in Control occurs. The Company shall keep
each Holder of
Notes reasonably and timely informed of (i) any such deferral
of the date
of prepayment, (ii) the date on which such Change in Control
and the
prepayment are expected to occur, and (iii) any determination
by the
Company that efforts to effect such Change in Control have
ceased or been
abandoned (in which case the offers and acceptances made
pursuant to this
Section 8.5 in respect of such Change in Control shall be
deemed
rescinded).
(g) Officer's Certificate. Each offer to prepay the Notes
pursuant to
this Section 8.5 shall be accompanied by a certificate,
executed by a
Senior Financial Officer of the Company and dated the date of
such offer,
specifying: (i) the Proposed Prepayment Date; (ii) that such
offer is made
pursuant to this Section 8.5; (iii) the principal amount of
each Note
offered to be prepaid; (iv) the interest that would be due on
each Note
offered to be prepaid, accrued to the Proposed Prepayment
Date; (v) that
the conditions of this Section 8.5 have been fulfilled; and
(vi) in
reasonable detail, the nature and date or proposed date of the
Change in
Control.
(h) Effect on Required Payments. The amount of each
payment of the
principal of the Notes made pursuant to this Section 8.5 shall
be applied
against and reduce each of the then remaining principal
payments due by a
percentage equal to the aggregate principal amount of the
Notes so paid
divided by the aggregate principal amount of the Notes
outstanding
immediately prior to such payment.
SECTION 9. ADDITIONAL AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
Section 9.1 Compliance with Law. The Company will comply with
all laws,
ordinances or governmental rules or regulations to which each of
them is
subject, including, without limitation, Environmental Laws, and
will obtain and
maintain in effect all licenses, certificates, permits, franchises
and other
governmental authorizations necessary to the ownership of their
respective
properties or to the conduct of their respective businesses, in
each case to the
extent necessary to ensure that non-compliance with such laws,
ordinances or
governmental rules or regulations or failures to obtain or maintain
in effect
such licenses, certificates, permits, franchises and other
governmental
authorizations could not, individually or in the aggregate,
reasonably be
expected to have a Material Adverse Effect.
10
Section 9.2 Insurance. The Company will maintain, with
financially sound
and reputable insurers, insurance with respect to their respective
properties
and businesses against such casualties and contingencies, of such
types, on such
terms and in such amounts (including deductibles, co-insurance and
self-insurance, if adequate reserves are maintained with respect
thereto) as, to
the Company's knowledge, is customary in the case of entities of
established
reputations engaged in the same or a similar business and similarly
situated.
Section 9.3 Maintenance of Properties. The Company will
maintain and keep
its properties in good repair, working order and condition (other
than ordinary
wear and tear), so that the business carried on in connection
therewith may be
properly conducted, provided that this Section 9.3 shall not
prevent the Company
from discontinuing the operation and the maintenance of any of its
properties if
such discontinuance is desirable in the conduct of its business and
the Company
has concluded that such discontinuance could not, individually or
in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
Section 9.4 Payment of Taxes. YouthStream Media Networks,
Inc., shall or
shall cause the Company to file all tax returns required to be
filed in any
jurisdiction and to pay and discharge all taxes shown to be due and
payable on
such returns and all other taxes, assessments, governmental
charges, or levies
imposed on them or any of their properties, assets, income or
franchises, to the
extent such taxes and assessments have become due and payable and
before they
have become delinquent and all claims for which sums have become
due and payable
that have or might become a Lien on properties or assets of the
Company,
provided that any such tax or assessment or claims need not be paid
if (i) the
amount, applicability or validity thereof is contested by the
Company on a
timely basis in good faith and in appropriate proceedings, and the
Company has
established adequate reserves therefor in accordance with GAAP on
the books of
the Company or (ii) the nonpayment of all such taxes and
assessments in the
aggregate could not reasonably be expected to have a Material
Adverse Effect.
Section 9.5 Corporate Existence, Etc. The Company will at all
times
preserve and keep in full force and effect its corporate existence
and all
rights and franchises of the Company unless, in the good faith
judgment of the
Company, the termination of or failure to preserve and keep in full
force and
effect such corporate existence, right or franchise could not,
individually or
in the aggregate, have a Material Adverse Effect.
Section 9.6 Covenants Regarding Earnings Before Interest,
Taxes,
Depreciation and Amortization. For the nine months ending September
30, 2005,
the Company must have, on a consolidated basis, in excess of Four
Million
Dollars ($4,000,000) of earnings before interest, taxes,
depreciation and
amortization, calculated in accordance with GAAP ("EBITDA"). For
each of the
fiscal years ending on and after September 30, 2006, the Company
must have, on a
consolidated basis, in excess of Seven Million Two Hundred Thousand
Dollars
($7,200,000)
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